The New UAE Companies Law: What you need to know ⭐
Choosing the UAE as your new base of operations involves learning about several essential aspects. Above all, you must acquire knowledge about its legal grounds in the country. Therefore, you will find it helpful to discover some details about the new UAE company law.
In this article, we will mention the changes in the new Companies Law in the UAE. For instance, it will allow you to discover details about LLC companies in the UAE today. So, begin your business journey in the Emirates after discussing the following subjects:
- What is the Companies Law in the UAE?
- Essential changes to the new UAE company law
- The bottom line of the changes in the new UAE company law
- Where to find more insights about the new UAE company law
1. What is the Companies Law in the UAE?
Multiple pieces of legislation are essential to the legal processes in the UAE today. For instance, employees should not sign their employment contracts without reviewing the UAE labour law. However, which of these pieces belongs to the business operations in the country?
The answer is simple: it is the Companies Law in the UAE. Above all, it applies to economic entities practicing any commercial, financial, industrial, or real estate economic activity in the country. In other words, it is not equal to Family Law.
Authorities issued the UAE Company Law in 2015 to promote business activities and foreign investment in the Emirates and the Middle East. Ergo, businesspersons used it to set up their companies in the UAE. This way, they took advantage of one of the best economies in the world.
However, things change, and laws and regulations must keep up with them to avoid problems. In this sense, UAE authorities changed aspects of the UAE Company Law to allow new companies in Abu Dhabi to grow. So, what changes did they make to it?
2. Essential changes to the new UAE company law
Since 2015, several changes and disruptions in the business world, including the COVID-19 Pandemic, hit the scene. As a result, features such as employment contracts in the UAE suffered substantial modifications. Logically, the UAE company law is not exempt from this.
The New Companies Law, which took effect on January 2, 2022, significantly enhances the principles of foreign ownership of enterprises and corporate governance.
Similarly to your Dubai visa status check, you and other businesspersons must review these changes to prepare your companies adequately. Assuredly, you may think this new Corporate Law can affect your organization. But you will notice that it will not be the case.
So, let us show you the changes in the new UAE company law of 2021:
2.1 New corporate vehicles
The third decade of the 21 century created changes in features such as the Construction Law to help employers and workers. In the case of the new UAE commercial companies law, one of the most notorious changes is the birth of new corporate vehicles. Let us review them in detail.
First, the new UAE company law includes a new concept: Special Purposes Acquisition Company (SPAC). In essence, SPACs allow investors to raise money through an Initial Public Offering (IPO). Indeed, their goal is to use this money to buy other companies, such as a Financial Law firm.
On the other hand, this UAE new law includes the concept of a Special Purpose Vehicle (SPV). Above all, the new Companies Law in the UAE states that it is a company that separates the obligations and assets associated with a financing operation from the ones of its parent entity.
In short, the new corporate law in the UAE includes these concepts for you to use in bond issuances and credit transactions. However, we expect UAE authorities to provide further information on how to use them. Undoubtedly, they will be an excellent tool for your business plans.
2.2 LLC Manager powers
The old companies law in the UAE established that LLC managers could not endure more than their designated term in the job. Nonetheless, some organizations, including experts in cheque bounce in the UAE, had difficulties finding a replacement. Thus, how is the UAE new law addressing this issue?
Instead of promoting the use of an unlimited contract resignation process, the new Companies Law in the UAE allows LLC managers to stay in office for an additional six months after their term expiration date. This way, organizations can use the time to search for and appoint new managers.
In summary, the new UAE company law gives LLC companies in the UAE time to choose or recruit new managers without disastrous delays. As a result, they will not see their management operations disrupted. By all odds, new companies in Abu Dhabi are more than happy about this change.
2.3 General assembly meeting in LLCs
LLC companies in the UAE can find some excellent changes related to their general assembly meetings in the new UAE company law. Logically, managers with a travel ban in the UAE cannot attend them. Nevertheless, some of these changes may surprise you in a good way.
First, this UAE new law states that non-managers can act as a proxy for a shareholder during meetings. On the other hand, organizations can now convene a general assembly in no less than 21 days. It is an improvement from the 15 days of the old UAE company law.
In addition, let us imagine that your first convened general assembly in your Civil Litigation firm does not have the required quorum. The new corporate law establishes that you must hold another meeting no more than 15 days after.
Above all, it will be deemed quorate regardless of what the memorandum of association in the UAE says about it.
Finally, the new UAE commercial companies law declares the inclusion of methods for settling disputes in the memorandum of association in the UAE as mandatory. Most importantly, these disputes may arise between managers, shareholders, or the company.
2.4 Statutory reserve
One additional change that worries LLC companies in the UAE involves the statutory reserve. More specifically, the change implies a reduction of its size to help them financially. Let us reveal it before you begin to set up a franchise in the UAE today.
The old UAE company law established the statutory reserve size as 10% of net profits. Nevertheless, the UAE new law decreases its size to 5%. Namely, the company will now have more money for its operations, marketing, payroll, and other essential processes.
2.5 Subscription shares in PJSCs
New companies in Abu Dhabi can learn about the changes in the UAE company law related to Public Joint-Stock Companies (PJSCs). Assuredly, they do not have to do with typing services in Dubai. Instead, they include new rules regarding subscription shares.
In this sense, founders of a drug offences firm or another company must subscribe to the percentage of shares specified in the prospectus and not to the previous 30% to 70%. On the other hand, they must also comply with UAE Securities and Commodities Authority (SCA) requirements.
2.6 Issuing discounted shares
World business markets are not stable today, and UAE authorities know it. First, such instability promotes criminal activities addressed by the new cyber law in the UAE. But what happens with the value of the shares of PSJCs in Dubai and throughout the UAE?
The new commercial companies law in the UAE handles this problem by allowing organizations to issue discounted shares in specific circumstances. For example, they can do so when the market price of the shares falls below their nominal value. As a result, they can handle market disruptions adequately.
2.7 Directors’ remunerations and appointments
Directors of PJSCs must read the new UAE company law. After all, it includes several changes regarding their appointments and remunerations. So, let us discuss them in detail while learning to use the RERA rent calculator in the UAE.
First, the UAE new law addresses directors that depart from their roles before their term expiration date. In essence, it states that the company board will have 30 days to appoint a replacement. Indeed, he will complete the remaining term of the previous director of the Islamic Finance firm.
On the other hand, the new Companies Law in the UAE also contains changes regarding their remuneration. Above all, the law establishes that it must not exceed 10% of the net profits of the fiscal year. Nonetheless, what happens if your company does not generate profits?
PJSCs that do not generate profits during a fiscal year can pay board members a lump sum fee depending on the company’s constitution. Besides, it also requires the approval of the general assembly. Last but not least, such a fee cannot surpass AED 200,000.
2.8 Foreign investment
UAE authorities are promoting foreign investments since the birth of the UAE corporate law in 2015. However, the previous regulations stated that local companies had to have at least 51% shareholding with UAE nationals. However, the new UAE company law changes this substantially.
Indeed, the new Companies Law in the UAE abolishes this requirement. In other words, it contains a relaxation of foreign ownership to promote foreign investments more. By all odds, foreigners will want to set up labor and employment law firms in Dubai because of it.
3. The bottom line of the changes in the new UAE company law
Undoubtedly, the new Companies Law in the UAE is evidence of the UAE’s intentions to keep improving its economy. After all, this and other new UAE laws follow several international practices to bring foreign corporations to the Emirates. Above all, they will find the Emirates ID status check as outstanding.
On the other hand, the new UAE corporate law also seeks to enhance competitiveness in the country. Indeed, it establishes the legal grounds that allow companies to compete in a fair market. As a result, they will stay in the UAE instead of signing Qatar employment contracts.
Finally, remember that this UAE commercial companies law works like any other regulation in the Emirates. Ergo, companies can face severe fines and penalties if they do not comply with the law. So, make sure your organization does not fail to do so.
4. Where to find more insights about the new UAE company law
Companies in the UAE now have a new piece of legislation that oversees their operations. Above all, it includes changes that will improve their finances if they generate the desired results. Therefore, do not wait any longer and learn what the new UAE company law will bring to your organization.
Logically, you will need to know the new Companies Law in the UAE to set up your company. However, you may find it challenging to make free time to review it in detail. Fortunately, you can hire our excellent services at Connect Legal and let us help you.
Allow us to help your organization to comply with the new UAE company law. You can also contact us to discover more about our legal services in the Emirates. So, get in touch with us via email at [email protected] today.
